Selling two properties to buy one - strategies

Reg_Smeeton

Hi all,

I am looking to buy a house with my partner.

We both currently have flats with mortgages, I have just accepted an offer on my flat (let’s call it Flat One), Flat Two is going to market shortly.

We do not need the small amount of equity in Flat 2 for our onward purchase - there is significantly more equity in Flat 1 and we also have cash in the bank.

My initial thought was to exclude Flat 2 from the chain and allow the sale to complete after flat 1/our onward purchase. However it is dawning on me that lenders may not be sympathetic to this approach… could any posters share their thoughts on how best to proceed?

TIA

silvercar

Is your mortgage offer subject to you redeeming the mortgage on flat 2, if so you will need to get the lenders consent to remove that clause. One option is to ask for consent to let on the mortgage for flat 2 as a temporary measure., that may allow your lender to exclude it from affordability.

Reg_Smeeton

Yes that’s correct.

Flat 2 is a joint ownership property with a housing association - I dont have details of the leasehold to hand but I would imagine we won’t be able to get consent to let on it for that reason?

Another thought I have had is to pay up the small mortgage on flat 2 with some of our cash in the bank to effectively exclude it from the transaction and sell it later. Would need to run the numbers to check it wouldnt affect our onward purchase but is this potentially a viable option?

silvercar

Reg_Smeeton said:

Yes that’s correct.

Flat 2 is a joint ownership property with a housing association - I dont have details of the leasehold to hand but I would imagine we won’t be able to get consent to let on it for that reason?

Another thought I have had is to pay up the small mortgage on flat 2 with some of our cash in the bank to effectively exclude it from the transaction and sell it later. Would need to run the numbers to check it wouldnt affect our onward purchase but is this potentially a viable option?

If you can afford to pay off its mortgage and not need any equity it has, then it’s an option. It is still a property that you own that you have the running costs to cover, so your lender may need to know. Though saying you intend letting it, may alleviate that concern.

Hoenir

I wouldn't overthink matters. Proceed with selling Flat I. Look for an onward purchase. Meanwhile market property 2 . Wait for events to unfold. 

amnblog

Not selling Flat 2 on, or before, your purchase day, will add a 3% stamp duty land tax bill to the purchase costs (reclaimable within 3 years but the money will be out of pockets for some time). Make sure you allow for that.

gwynlas

If you are not planning to get married or enter a civil partnership it is important to set up a deed of trust to define wht belongs to who in case of break up/death as you apppear to be financially unequal